2021 (3) TMI 847 - HC - Income Tax

Correct head of income - Gain on sale of land - property owned by co-owners - capital gain or business income - HELD THAT - The assessee and Shri Narendra Kanhaiyalal Parikh were joint purchasers of agricultural land by virtue of sale-deeds dated 23.03.2004 and 29.04.2004. After converting the same for non agricultural use, various plots came to be sold. Prima-facie we find that as the co-owner has been granted benefit of capital gains with regard to the same transaction which assessment order has been accepted by the Revenue, said aspect deserves to be taken into consideration while adjudicating the claim of the assessee for seeking benefit of capital gains. The said assessment order dated 30.03.2013 was in existence when the Tribunal decided the appeal. The same was however not brought on record by the assessee. In the peculiar facts of the present case as it is found that co-owner of the same land has been granted benefit of capital gains we find that the effect of the assessment order passed in the case of the co-owner deserves to be considered by the Income Tax Appellate Tribunal. For the said purpose, a re-consideration of the proceedings by the Income Tax Appellate Tribunal would be necessitated. The substantial question of law as framed is answered by holding that the effect of the sale transaction of the coowner being extended the benefit of capital gains deserves to be considered by the Income Tax Appellate Tribunal as income from the same transaction has been treated as business income insofar as the assessee is concerned. In that view of the matter the following order is passed The order passed by the Income Tax Appellate Tribunal, Nagpur Bench, Nagpur on 23.11.2017 is set aside. The proceedings are remanded to the Tribunal to re-consider the appeal with a liberty to the assessee to raise additional grounds in support thereof. The assessee is at liberty to place on record the assessment order dated 30.03.2013 passed by the Assessing Officer in the case of Shri Narendra Kanhaiyalal Parikh for its due consideration by the Income Tax Appellate Tribunal without going into the question of limitation. The appeal shall be decided on its own merits without being influenced by any observations made in this judgment. The appeal be preferably decided within a period of three months from the date of its first hearing.

Summary

Issues:
Challenge to the order of the Income Tax Appellate Tribunal regarding the treatment of sale transaction as business income instead of capital gain for the appellant.

Detailed Analysis:

Issue 1: Treatment of Sale Transaction

The appellant-assessee filed a return for the assessment year 2010-11, claiming a deduction under Section 54F of the Income Tax Act on long-term capital gain. The Assessing Officer disallowed the claim and treated the entire sale consideration of immovable property as business income. The Commissioner of Income Tax (Appeals) upheld this treatment, which was further supported by the Income Tax Appellate Tribunal. The Tribunal observed that the appellant had sold multiple plots during the relevant period, indicating an intention to exploit the commercial potential of the land. The appellant argued that the co-owner of the land had been granted the benefit of capital gains for the same transaction, and thus, the appellant should also receive the same treatment.

Issue 2: Additional Evidence and Assessment Order

The appellant sought to introduce additional evidence regarding the assessment order passed in the case of the co-owner of the land. The argument was that since the co-owner had been granted the benefit of capital gains, this should be considered in the appellant's case as well. The Income Tax Appellate Tribunal had not been presented with this assessment order during the initial proceedings. The appellant contended that this assessment order should be taken into account to determine the appropriate treatment of the sale transaction for the appellant.

Issue 3: Adjudication and Remand

Upon review, the High Court found that the co-owner had indeed been granted the benefit of capital gains for the same transaction. As a result, the Court set aside the decision of the Income Tax Appellate Tribunal and remanded the proceedings for reconsideration. The Tribunal was directed to allow the appellant to raise additional grounds and to consider the assessment order of the co-owner in determining the treatment of the sale transaction for the appellant. The Court emphasized that the appeal should be decided on its merits without being influenced by previous observations, with a preference for a decision within three months from the first hearing.

In conclusion, the High Court allowed the appeal, setting aside the Tribunal's decision and remanding the case for further consideration, taking into account the treatment of the sale transaction for the co-owner and allowing the appellant to present additional evidence and grounds for review.